Vulcan Materials to Buy Florida Rock, Sector Rallies On News
Vulcan Materials, a maker of highway construction materials, on Monday said it agreed to buy Florida Rock Industriesin a cash and stock deal worth around $4.6 billion.
The purchase, which pushed shares of other construction materials companies higher Tuesday, allows Vulcan to expand its presence in Florida and in other high-growth markets in the U.S. Southeast and Mid-Atlantic states, the Birmingham, Alabama-based company said.
The companies make construction aggregates--granite, sandstone, limestone and gravel--for the building of roads and sidewalks.
Florida Rock shareholders can elect to receive either 0.63 shares of the new holding company or $67 in cash for each Florida Rock share, with the buyer seeking to ensure that an aggregate 70% of Florida Rock shares will be converted into cash and 30% converted into stock.
The transaction, to close in mid-year 2007, is expected to be neutral to Vulcan Materials' earnings in 2007 and should add to earnings in 2008 and beyond, the company said. Vulcan Materials expects to achieve annual pre-tax cost synergies of approximately $50 million.
Florida Rock President and Chief Executive John Baker will join Vulcan Materials' board of directors after the deal, and Vice President Tom Baker will become president of Vulcan Materials' new Florida Rock Division headquartered in Jacksonville, Florida, Vulcan said.
The Baker family founded the company and is its largest shareholder.
Florida Rock's operations in Georgia, Virginia, Maryland and other states will be integrated into existing Vulcan Materials divisions. Following the close of the transaction, Vulcan Materials will have approximately $3.7 billion in debt.
Shares of Florida Rock recently gained 41.7%, or $19.56, to $66.52, while Vulcan shares slipped 1%, or $1.01, to $110,80.
Others in the sector posted gains, with Texas Industries, U.S. Concrete, Martin Marrietta Materials and Eagle Materials, all climbing higher.